The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE)
are the two primary exchanges in India. In addition, there are 22 Regional Stock
Exchanges. However, the BSE and NSE have established themselves as the two leading
exchanges and account for about 80 per cent of the equity volume traded in India.
The NSE and BSE are equal in size in terms of daily traded volume. The average daily
turnover at the exchanges has increased from Rs 851 crore in 1997-98 to Rs 1,284
crore in 1998-99 and further to Rs 2,273 crore in 1999-2000 (April - August 1999).
NSE has around 1500 shares listed with a total market capitalization of around Rs
9,21,500 crore (Rs 9215-bln). The BSE has over 6000 stocks listed and has a market
capitalization of around Rs 9,68,000 crore (Rs 9680-bln). Most key stocks are traded
on both the exchanges and hence the investor could buy them on either exchange.
Both exchanges have a different settlement cycle, which allows investors to shift
their positions on the bourses. The primary index of BSE is BSE Sensex comprising
30 stocks.

NSE has the S&P NSE 50 Index (Nifty) which consists of fifty stocks. The BSE
Sensex is the older and more widely followed index. Both these indices are calculated
on the basis of market capitalization and contain the heavily traded shares from
key sectors. The markets are closed on Saturdays and Sundays. Both the exchanges
have switched over from the open outcry trading system to a fully automated computerized
mode of trading known as BOLT (BSE on Line Trading) and NEAT (National Exchange
Automated Trading) System. It facilitates more efficient processing, automatic order
matching, faster execution of trades and transparency. The scrips traded on the
BSE have been classified into 'A', 'B1', 'B2', 'C', 'F' and 'Z' groups. The 'A'
group shares represent those, which are in the carry forward system (Badla). The
'F' group represents the debt market (fixed income securities) segment. The 'Z'
group scrips are the blacklisted companies. The 'C' group covers the odd lot securities
in 'A', 'B1' & 'B2' groups and Rights renunciations. The key regulator governing
Stock Exchanges, Brokers, Depositories, Depository participants, Mutual Funds, FIIs
and other participants in Indian secondary and primary market is the Securities
and Exchange Board of India (SEBI) Ltd.

SPECULATOR Vs INVESTOR

Legendary investor Benjamin Graham considered the distinction between the two so
important that "Investment versus Speculation" is the title and subject of the first
chapter of his classic book The Intelligent Investor. According to Graham, "The
distinction between investment and speculation in common stocks has always been
a useful one and its disappearance is a cause for concern. We have often said that
Wall Street as an institution would be well advised to reinstate this distinction
and to emphasize it in all dealings with the public. Otherwise the stock exchanges
may some day be blamed for heavy speculative losses, which those who suffered them
had not been properly warned against."

Speculation means the ownership of an asset with the intent to profit from expected
changes in supply or demand. For example, a speculator buys a share of stock not
to benefit from the dividends or the earnings of a company, but because he expects
the demand for the stock to rise, lifting its price. Similarly, one speculates in
a commodity such as silver because one expects demand to shift, or one might sell
short wheat (selling to buy back later) if one thinks the supply will increase more
than others expect. Sometimes speculators are termed as investors; following is
how a speculator behaves in the stock market:

They are tipped of a 'news'/'rumor' in a 'hot stock'
from their broker.

They impulsively buy the
scrip.

And after the purchase wonder why they
bought the stock.

For a smarter approach to investing, you should do something as follows:

1. Check how much cash or equivalent you have and your risk aptitude.

Stock market can give you high return on your investments, but carry an equal risk
of loss as well. So before investing you should find out you risk aptitude.

2. Know all the stock terminologies.

Following are the most commonly used market terminologies:

P/E ratio (price-to-earnings ratio) = Current market
price/Net Income

Earning per share (EPS) = Net Income/Number of Outstanding
Shares

Market capitalization to sales ratio = Market Cap/Total
revenues

High (high) = The highest price for the stock in the
trading day.

Low (low) = The lowest price for
the stock in the trading day.

Close (close) = The price of the stock at the time
the stock market closes for the day.

Chg (Change) = The difference between two successive
days' closing price of the stock.

Yld (Yield) = Dividend divided by price

Bid and Ask (Offer) Price: When you enter an order to buy or sell a stock, you will
essentially see the “Bid” and “Ask” for a stock and some numbers. What does this
mean?

The ‘Bid’ is the buyer’s price. It is this price that you need to know when you
have to sell a stock. Bid is the rate/price at which there is a ready buyer for
the stock, which you intend to sell.

The ‘Ask’ (or offer) is what you need to know when you're buying i.e. this is the
rate/ price at which there is seller ready to sell his stock. The seller will sell
his stock if he gets the quoted “Ask’ price.

Bid size and Ask (Offer) size:

If an investor looks at a computer screen for a quote on the stock of say ABC Ltd,
it might look something like this:

Bid Price: 3550

Offer Price : 3595

Bid Qty : 40T

Offer Qty : 20T

What this means is that there is total demand for 40,000 shares of company ABC at
Rs 3550 per share. Whereas the supply is only of 20,000 shares, which are available
for sale at a price of Rs 3595 per share. The law of demand and supply is a major
factor, which will determine which way the stock is headed.

3. Research the company you are planning to invest in.

Armed with this information, you've got a great chance to pick up a winning stock.
Again don’t be in a hurry, ferret out some more facts, try to find out as to who
is picking up the stock (FIIs, mutual funds, big industrial houses? The significance
of which you will learn in section II of our learning center). Watch for the daily
volume in a day: is it more/less than the average daily volume? If it's more, maybe
some fund is accumulating the stock.

4. Place an order with your broker

Having an experienced broker on your side can help you make a better decision. Get
the current status of the stock movement such as real-time quote, average trades
per day, total number of shares outstanding, dividend, high and low for the day
and for the last 52 weeks. This information should give you an indication of the
nature of the company’s performance and stock movement. Once you are fully satisfied
with your research you should go ahead with your order.

BULL MARKET

A bull market is when everything in the economy is great, people are finding jobs,
gross domestic product (GDP) is growing, and stocks are rising. Picking stocks during
a bull market is easier because everything is going up. But Bull markets don’t last
forever and there is always a correction, and sometimes they can lead to dangerous
situations if stocks become overvalued. If a person is optimistic and believes that
stocks will go up, he or she is called a "bull" and is said to have a "bullish outlook".

BEAR MARKET

A bear market is when the economy is bad, recession is looming and stock prices
are falling. Bear markets make it tough for investors to pick profitable stocks.
One solution to this is to make money when stocks are falling using a technique
called short selling. Another strategy is to wait on the sidelines until you feel
that the bear market is nearing its end, only starting to buy in anticipation of
a bull market. If a person is pessimistic, believing that stocks are going to drop,
he or she is called a "bear" and said to have a "bearish outlook".